ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

Year ended December 31, 2022, with comparative information for 2021

3. Significant accounting policies (continued):

(b) Financial instruments:

(i) Non-derivative financial assets:

The Exchange recognizes financial assets on the trade date, at which the Exchange becomes a party to the contractual provisions on the financial asset contract.

The Exchange derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Exchange neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Exchange recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Exchange retains substantially all the risks and rewards of ownership of a transferred financial asset, the Exchange continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Exchange has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

The Exchange has classified financial assets as either fair value through profit or loss ("FVTPL") or loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets at FVTPL:

A financial asset is classified as FVTPL if it has been acquired principally for the purpose of selling in the near future or is designated as such upon initial recognition. Financial assets are designated as FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise, and the financial asset forms part of a portfolio of financial assets which is managed and its performance is evaluated on a fair value basis, in accordance with the Exchange's documented risk management or investment strategy, and information about the portfolio is provided internally on that basis.

The Exchange's investments are classified as FVTPL. Investments include debt and equity securities and treasury bills.

Investments at FVTPL are recorded at fair value with realized gains and losses on sale and changes in the fair value recorded in net investment income. Transaction costs, as well as custodian and investment manager fees related to FVTPL financial assets are recognized in income as incurred, as part of general investment expenses.

Loans and receivables:

Loans and other receivables that have fixed or determinable payments that are not quoted in an active market are designated as loans and receivables. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Loans and receivables are comprised of accounts receivable.